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Transcript for audio podcast: Understanding Fraud in HHS Grants and Contract Awards

From the Office of Inspector General of Department of Health and Human Services

My name is Diane Cutler. I am a criminal investigator in the HHS Office of Inspector General. I am going to talk to you about fraud in HHS grant and contract awards - and the penalties faced when someone commits fraud.

First let me explain the difference between a grant and a contract. A grant should carry out a public purpose authorized by law, while a contract should provide goods and services for the benefit of the government.

HHS is the largest grant-making organization and the third largest contracting agency in the entire Federal Government.

Some HHS grant programs you've probably heard of include Head Start and Medicaid. Each year, HHS awards about $90 billion dollars in grants for programs, other than Medicaid, and $19 billion dollars in contracts.

These are important programs that provide critical services to people in need. When these funds are stolen, the impact can be devastating on people who are dependent on these resources.

What is grant and contract fraud? Fraud is a crime of deception. It means lying, cheating, or stealing to get something of value. It is theft, and it's a serious crime.

Most people are honest and want to do the right thing.

But when natural disasters strike, people can be tempted by grant and contract awards.

Grant and contract money must be used for its intended purpose. Here is what you have to remember: When fraud, waste and abuse occur in grants and contracts, there are far-reaching consequences. This is not a victimless crime. When grant or contract funds are stolen, people who need help can't get it.

There are three main kinds of grant and contract fraud:

  • theft;
  • materially false statements, and;
  • fraud resulting from conflicts of interest.

Theft is the most common scheme and can take many forms. Some examples:

  • A businessman embezzles grant funds;
  • a scientist steals government funded equipment for her own research purposes;
  • a credit card designated for grant-funded expenses is used for personal purchases;
  • a company creates fake time and attendance records for ghost employees.

That is theft. That is fraud. That is illegal.

Submitting materially false statements is a second category of fraud common in grants and contracts.

This is also committed in various ways, and during any phase of the process, ranging from submitting false documentation in the application to submitting false invoices as proof for payment, to knowingly charging unallowable costs to grants or contracts. Another materially false statement to the government can be the failure; to provide adequate supporting documentation about the use of funds.

Another category of fraud can involve conflicts of interest. The government is concerned about conflicts of interest because they can involve self-dealing and can conceal fraudulent activity.

For example, a grantee who orders food from his own catering business can more easily submit false invoices from that business. Even the appearance of a conflict of interest can undermine the public's confidence in the integrity of HHS grant and contract programs. Any time a person's interests and the government's interests are at odds, a grant or contract officer should be consulted.

Who are the people that commit this type of fraud? There is no typical profile. They may be business owners, government workers, or nonprofit employees.

What happens to those who commit fraud? People who commit fraud in HHS grants or contracts can be subject to severe penalties.

  • they can be fired from their jobs;
  • they can be banned from receiving future HHS contracts and grants;
  • they may have to pay money;
  • they may face civil lawsuits;
  • and some may be criminally prosecuted and serve time in jail.

You can help us fight grant and contract fraud. Almost every American is touched by programs funded with HHS grants and contracts. We all have a responsibility to ensure the funds for these programs are used for their intended purpose: providing help to the people who need it.

If you suspect fraud involving an HHS grant or contract we want to know. Contact us at 1-800-HHS-TIPS or on the web, at


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Office of Inspector General, U.S. Department of Health and Human Services | 330 Independence Avenue, SW, Washington, DC 20201